LLC/Personal Name Deed

[Scott Kays]

Hello, Bigger Pockets community! I opened an account a few months back and have learned a lot from reading different posts and conversations, but this is the first time I've posted anything.

Anyway, here's my question. I bought my first couple of properties inside my LLC. Since these were cash sales, I'm in the process of moving them into a long-term fixed-rate mortgage in order to BRRRR out of them and pull the capital back out to reinvest. In order to get delayed financing, though, I have to deed the properties to myself just long enough to set up the mortgages and then deed them back to the LLC after the fact. Each time I move one of these properties, it costs me $110.00 in recording fees, etc. So, two properties moving one way and then back again would be a total of $440.00.

I was thinking that if I already know I'm going to have to do this on any future properties I purchase, would it make more sense to save half of those recording fees, etc., by making the initial cash purchases in my personal name so that I only have to move the properties once from my name to that of the LLC after the delayed financing mortgage process has been completed? It's not a ton of money, I know, but every little bit helps, and it seems senseless to pay extra fees if there's a way around them. Then again, if it's going to cause all kinds of problems that I haven't considered, then I suppose the fees for the additional move aren't the end of the world and are certainly worth the peace of mind.

I’m curious to know your thoughts on this. Thanks!

P.S. I know the above explanation might sound as though I’m going to trigger a due-on-sale clause; however, this is not the case for two reasons. One is that FNMA provides an exemption to the due-on-sale clause when executing a mortgage as part of the delayed financing exemption to cash-out refinances. Secondly, the bank I’m working with is already well aware that this is my plan and has approved it ahead of time.

[Costin I.]

@Scott Kays Another advantage of using land trusts - they give you a layer of anonymity (not liability protection) that works great with the LLC (which gives you the liability protection), and keeps your name out of the public records (supposedly, you still have to be careful, e.g. with the title mistakenly recording the trust documents too).

As I mentioned, be careful when choosing to use a Quit Claim Deed - to maintain your title chain, you have to do it through a more expensive Warranty Deed (which might be another reason to use land trust, just check how they work together):
A person receiving a purported real estate interest via a quitclaim deed may receive no legal right to the property whatsoever. If the person seeking to transfer real estate with a quitclaim deed has no legal interest, nothing legally is conveyed. In the absence of title insurance--which is not available for a quitclaim deed--the person receiving the quitclaim deed has no legal recourse because the deed itself states that only the interest of the grantor, if any interest exists, is conveyed.
Whether title insurance terminates by transferring real property depends on the type of policy, and how “insured” is defined in the policy. You take a risk which could result in cancellation of your title insurance and complete loss of your real property without compensation in the event that a title issue regarding your real property arises.
Contact your title insurance company to determine coverage and if your policy does cover transfers , and when or how.